Robust Pricing and Hedging of Options on Multiple Assets and Its Numerics

Stephan Eckstein, Gaoyue Guo, Tongseok Lim, Jan Oblój

Abstract: We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multimarginal martingale optimal transport problem. We propose two numerical methods to solve such problems: using discretization and linear programming applied to the primal side and using penalization and deep neural networks optimization applied to the dual side. We prove convergence for our methods and compare their numerical performance. We show how adding further information about call option prices at additional maturities can be incorporated and narrows down the no-arbitrage pricing bounds. Finally, we obtain structural results for the case of the payoff given by a weighted sum of covariances between the assets.